Los Angeles City School Dist. of Los Angeles County v. Landier Management Co.

• Decision Date: 09 February 1960
• Citation: 2 Cal.Rptr. 662,177 Cal.App.2d 744
• Court: California Court of Appeals Court of Appeals
• Parties: LOS ANGELES CITY SCHOOL DISTRICT of Los Angeles County; Los Angeles City High School District of Los Angeles County; and Los Angeles City Junior College District of Los Angeles County, Plaintiffs and Respondents, v. LANDIER MANAGEMENT COMPANY, a corporation; Landier Investment Company, a corporation; Landier Transit Company, a corporation, Crown Body and Coach Corporation, a corporation; Bank of America National Trust and Savings Association, a National banking association; and Felicien P. Landier, Defendants. Landier Investment Company and Felicien P. Landier, Appellants. Civ. 24037.

Page 662

2 Cal.Rptr. 662

177 Cal.App.2d 744

LOS ANGELES CITY SCHOOL DISTRICT of Los Angeles County; Los Angeles City High School District of Los Angeles County; and Los Angeles City Junior College District of Los Angeles County, Plaintiffs and Respondents, v. LANDIER MANAGEMENT COMPANY, a corporation; Landier Investment Company, a corporation; Landier Transit Company, a corporation, Crown Body and Coach Corporation, a corporation; Bank of America National Trust and Savings Association, a National banking association; and Felicien P. Landier, Defendants Landier Investment Company and Felicien P. Landier, Appellants.

Civ. 24037.

District Court of Appeal, Second District, Division 1, California.

Feb. 9, 1960.

Hearing Denied April 6, 1960.

Kasch & Cook, Leo M. Cook, Ukiah, for appellants.

Harold W. Kennedy, Co. Counsel, Wm. E. Lamoreaux and Clarence H. Langstaff, Asst. Co. Counsel; Jerry F. Halverson, Deputy Co. Counsel, Los Angeles, for respondents.

LILLIE, Justice.

The present proceeding grew out of various contracts entered into during the years 1948 and 1950, between the plaintiffs and defendant Landier Management Company, for the transportation of the pupils of plaintiff school districts. Within a year following the letting of the last contract, it was represented to the plaintiffs that three members of their governing board had an interest contrary to law in the subject of certain of the aforesaid agreements. Accordingly, in November of 1951, plaintiffs filed an action for declaratory relief wherein the asserted interest was set forth and wherefore it was prayed that the contracts in question be declared void ab initio and they recover the entire sum paid out thereunder, amounting to $1,548,852.74. The Landier defendants appeared by way of answer, which included a denial that the three members' participation in the several transactions constituted an 'interest' proscribed by California statutes. Much of the then pertinent law is discussed in People v. Becker, 1952, 112 Cal.App.2d 324, 246 P.2d 103, and People v. Elliott, 1953, 115 Cal.App.2d 410, 252 P.2d 661, which sustained the removal from office of two board members mentioned in the complaint for declaratory relief.

The action was noticed for trial on May 27, 1952, and thereafter continued from time to time; finally, on March 18, 1954, trial was set for August 17, 1954. Meantime, in the early part of 1953, negotiations for settlement were in progress between plaintiffs' counsel and separate counsel for Landier Investment Company and F. P. Landier (appellants herein), and the other Landier defendants respectively. These negotiations are reflected by certain correspondence which was considered by the court below and which has been made a part of the record on appeal. One proposed settlement formula would have involved payment to plaintiffs of the excess profits (approximating $123,000) over and above those profits considered to be fair and reasonable by a board of experts. This proposal was rejected, as it did not constitute a return of all profits realized under the contracts; and it was stated by plaintiffs' counsel that 'unless a far more substantial settlement is made, the public policy would appear * * * to require the Courts * * * to decide what amounts the School Districts should recover.' Thereafter, by letter dated June 22, 1954, the attorney for Mr. Landier and Landier Investment offered to pay the sum of $264,776.86 in yearly installments of $33,097.11 without interest on principal or installments, and declared that 'the amount of the judgment, if the plaintiffs were successful * * * would necessarily be the amount prayed for * * * or over $1,000,000.00,' and would compel the institution of bankruptcy proceedings to obtain relief therefrom. Negotiations for settlement continued. As a result, by letter dated July 7, 1954, plaintiffs' counsel sought approval by plaintiffs' governing board of 'a formal offer (from defendants) to settle this litigation as to all of the defendants.' Under a proposed stipulation contemplated thereunder and to be executed by all parties, defendants F. L. Landier and Landier Investment Company would pay the total sum of $264,776.86, without interest upon principal or any installments, in the following manner: one-eighth thereof, or $33,097.11, on the twentieth day of October of each year, commencing October 20, 1955, until the whole amount was paid, the action then to be dismissed as to the other defendants. Included in the stipulation would also be a provision that in the event of default in any payment for a period of thirty days, after thirty-day notice of such default, without further notice, judgment could be entered against defendants F. P. Landier and Landier Investment for twice the unpaid balance. Acceptance of the offer was recommended by plaintiffs' counsel to their governing board for the following reasons: '1. It is substantial, exceeding one quarter of a million dollars. 2. It provides an economic sanction for failure to meet the payments. 3. It would pay to the School Districts all profits which have been made under the four contracts. The settlement would therefore remove all profit from these contracts.'

As to the possibility of defendants' relief from their obligation by way of discharge in bankruptcy, the letter declared that 'it seems to us that those possibilities are as well covered in this settlement as they can be in business transactions of this sort,' adding: '(t)he threat of a judgment in the amount of twice the unpaid balance due on the settlement is just about as potent an economic weapon as the Board could have to enforce payment of the full amount provided by the settlement.' Counsel for defendants gave written approval of this letter which 'constitutes an accurate statement of the offer to settle the subject litigation which is hereby confirmed by Mr. F. P. Landier and Landier Investment Co.' On August 17, 1954, a 'Stipulation for Settlement' was executed by a representative of plaintiffs' governing board, defendant Landier (for himself and Landier Investment) and the attorneys for all parties concerned, and thereafter filed with the court; subsequently the action was dismissed as to defendants Landier Management and Landier Transit and marked 'off calendar' as to F. P. Landier and Landier Investment.

Three payments, totalling $99,291.33, were subsequently made. In June of 1958 defendants substituted present counsel as their attorneys; and thereafter, on July 30, 1958, they noticed a motion to be relieved of the 'Stipulation for Settlement' executed by them and filed with the lower court almost four years previously. Contending that its provisions constituted a penalty with no relation to any damage sustained (Civil Code, Section 1970), defendants prayed that paragraph three of the Stipulation be modified to provide that in the event of default, judgment be entered for the balance due and unpaid, not for twice the unpaid balance due as therein provided, and that the payments theretofore made be adjudged a reasonable and fair settlement of the litigation; and that the action accordingly be dismissed with prejudice to them. The motion was denied; and on November 5, 1958 (appellants concededly then being in default) on ex parte application of respondents, judgment in the sum of $330,971.06, double the balance unpaid, was rendered for plaintiffs pursuant to the stipulation on the original complaint.

On this appeal from the judgment entered pursuant to respondents' ex parte application, appellants in effect ask this court to review the trial court's order denying their motion for relief from the stipulation by renewing the contentions made on their motion to the lower court that the double payment provision of the stipulation is penal in character and therefore unenforceable; and that subsequent amendments to the Education Code eliminated any legal objections to the contracts which were the subject of the action for declaratory relief. Although there appears to be merit to the first of these contentions, since 'it is judicial action, and not judicial reasoning or argument, which is the subject of review' (International, etc., Workers v. Landowitz, 20 Cal.2d 418, 423, 126 P.2d 609, 612), we are of the opinion that the denial of the motion was proper in the light of procedural matters and principles hereinafter discussed.

Ordinarily a party may be relieved from a stipulation only upon timely application to the court wherein it was made, notice thereof first being given to the opposing party (46 Cal.Jur.2d 'Stipulations' 46). A hearing should then be had on affidavits and counter-affidavits (Warburton v. Kieferle, 135 Cal.App.2d 278, 286, 287 P.2d 1), and the court, in the exercise of its sound discretion, may set aside a stipulation entered into through inadvertence, excusable neglect, fraud, mistake of fact or law, where the facts stipulated have changed or there has been a change in the underlying conditions that could not have been anticipated, or where special circumstances exist rendering it unjust to enforce the stipulation (46 Cal.Jur.2d supra, 43-44). See also Gonzalez v. Pacific Greyhound Lines, 34 Cal.2d 749, 755, 214 P.2d 809. In the case at bar, appellants properly complied with the requirement that the discretion and powers of the trial court to grant relief must first be invoked; but failed to file any supporting affidavit which would explain the lack of timeliness manifest on the face of the written motion. The competency of appellants' previous counsel is not challenged, nor is there any claim of misrepresentation; in short the memorandum of points and authorities accompanying the motion simply suggests that their execution of the stipulation was based on a mistake of law and other special circumstances, including an asserted change in the law governing the main action.

Appellants properly maintain that a stipulation is a contract (Palmer v. City of Long...